Merger Decision Making: An Ethical Analysis and Recommendation

MacIntyre Alasdair , “Utilitarianism and Cost-Benefit Analysis: An Essay on the Relevance of Moral Philosophy to Bureaucratic Theory,” in Sayre Kenneth , ed., Values in the Electric Power Industry (Notre Dame, IN: University of Notre Dame Press, 1977).

Allison Graham , Essence of Decision: Explaining the Cuban Missile Crisis (Boston, MA: Little, Brown & Co., 1971).

Kriesberg Simeon , “Decision-Making Models and the Control of Corporate Crime,” The Yale Law Journal, 85 (July 1976): 1100–1101.

Ibid., p. 1106; see also Allison , op. cit., p. 37.

One characteristic of the Rational Actor Model is that individual psychological motivation deeper than means-ends considerations is not addressed directly. This is both a strength and weakness. Individual psychological motivation is an important issue in decision making, but one that does not lend itself to modeling. Consequently, the Rational Actor Model confines itself to means-ends reasoning and passes silently over the difficult underlying questions of individual psychological motivation. Despite some speculation in the literature (see Levison Harry , “A Psychologist Diagnoses Merger Failures,” Harvard Business Review, March/April 1970), very little is known on the individual psychological motivation of merger decision makers.

Sartre Jean-Paul , Existentialism and Human Emotions (1957).

Hospers John , Human Conduct: Problems of Ethics (New York, NY: Harcourt Brace Jovanovich, Inc., 1982), p. 83.

Sayre Kenneth Goodpaster Kenneth , “An Ethical Analysis of Power Company Decision Making,” in Sayre Kenneth , ed., Values in the Electric Power Industry (Notre Dame, IN: University of Notre Dame Press, 1977), p. 239.

For a more comprehensive and systemic analysis that confirms the conclusion that a utilitarian ethical system must underlie the decision making in bureaucratic organizations, see MacIntyre Alasdair , op. cit. Moreover, the method of ethical analysis of decision making applied in this paper is modeled on the pioneering studies of Kenneth Sayre (op. cit.) and Sayre Kenneth Maher Ellen Arnold Peri Goodpaster Kenneth Rodes Robert Stewart James , Regulation, Values and the Public Interest (Notre Dame, IN: University of Notre Dame Press, 1980); and, in particular, MacIntyre (op. cit.) and Sayre and Goodpaster (op. cit.). For a more extended justification of this method of ethical analysis of decision making, see Sayre Goodpaster , op. cit., pp. 238–243.

Copeland Thomas Weston J. , Financial Theory and Corporate Policy (Reading, MA: Addison Wesley Publishing Co., Inc., 1982), p. 236.

This analysis does not mean to deny the existence of other ethical systems underlying merger decision making in specific circumstances. Merger activity may be engaged in by a chief executive in an attempt to satisfy individual psychological needs, in particular for power or prestige. Without exploring this difficult issue further here, I will simply affirm that some system of ethics, some conception of values, underlies the decision making even under these conditions and thus that this decision-making process is also subject to an ethical analysis.

This alternative follows the conception of organizational decision making discussed in Ladd John , “Morality and the Ideal of Rationality in Formal Organizations,” The Monist, 54 (1970).

MacIntyre Alasdair , op. cit.

Rappaport Alfred , “Strategic Analysis for More Profitable Acquisitions,” Harvard Business Review (July/August 1979), p. 101.

MacIntyre Alasdair , op. cit., pp. 223, 232–233.

Hospers John , op. cit., p. 119.

Stone Christopher , Where the Law Ends: The Social Control of Corporate Behavior (New York, NY: Harper & Row, 1975).

For a further discussion of the potential role of capital markets in evaluating proposed mergers, see Eisenberg Melvin , The Structure of the Corporation; A Legal Analysis (Boston, MA: Little, Brown & Co., 1976), pp. 56–63.